10/05/2009 @ 7:00PM

Bloggers Who Get Cash Or Freebies Must Disclose It

Christine Mikesell, a 32-year-old pediatric ICU doctor in Ann Arbor, Mich., blogs about beauty products at 15minbeauty.blogspot.com. Mikesell, who started the blog three years ago, receives up to 50 e-mails a day from PR companies that want to send her beauty products. (She accepts 5% of the offers.) Today Mikesell doesn’t disclose her freebies, but that’s about to change.

The Federal Trade Commission has issued new guidelines that require bloggers to disclose any free goods or payments they get when reviewing company products online–in blogs or through social media outlets. Those who don’t disclose will be handed a cease-and-desist order from the FTC. If they refuse to take down their post, they will be slapped with a $11,000 fine. This is the first time since 1980 that the FTC has changed its rules for advertising endorsements and testimonials.

Since learning of the FTC’s requirement, Mikesell, whose site generates 1,700 unique page views every day, plans to include an icon at the bottom of each product review that will identify whether she bought the item or received it for free. Mikesell says that sponsored reviews are ubiquitous in the beauty blogosphere. “There are some people who will gush about a product that I know to be horrible,” she says. “It’s obvious that they just cut and pasted it from a PR person.”

Over the past year, with marketers feeling the crunch of recessionary budgets, many companies have formed relationships with popular bloggers, like Mikesell, who have followings in the hundreds of thousands and can make big impressions with their fans. Those relationships have fallen outside the traditional vendor-consumer boundaries and often haven’t been disclosed, says Rich Cleland, assistant director of the FTC’s advertising practices division. “We’re alerting bloggers and non-traditional promoters that the truth in advertising principles applies to them too,” Cleland says.

Just how the FTC expects bloggers to disclose is still unclear. Ted Murphy runs a company called Izea that pairs companies and their wares with bloggers willing to shill about them for a typical fee of $200 to $1000. He says he requires bloggers who write for him to post a picture of an emblem that says, “100% sponsored.” Other bloggers, such as Sarah Austin, who runs a popular video “life-casting” site called Pop17, post company logos on a special section of her blog that lists all her other sponsors. On her Twitter site, she ends tweets with “#spon” to indicate that she has been paid.

Tammy Gibson, a stay-at-home mother of two in Southern California, blogs about fashion and beauty at amominredheels.com. She, too, plans to alert readers when she reviews a “gifted” beauty product, which accounts for 70% of her overall beauty reviews. “There seems to be so much confusion right now about regulation,” says Gibson, 38. “Bloggers are asking ‘Do I need to disclose something on every post, or just on the site as a whole?’”

“When in doubt, disclose,” says Cleland. Disclosure on each post is preferable to creating a section for sponsorship information. Many bloggers have created disclosure buttons that their readers can click, but they give no indication as to why readers should open up the information. “If you’re writing about something and getting paid to do it, just work it into the writing,” Cleland says. “There’s no disincentive to stating what you’re doing and why you’re doing it.”

How does the FTC expect to police a blogosphere of millions? “It doesn’t,” says Cleland. “We’re turning our eyes to the advertisers.” The government agency will keep watch over companies who hire bloggers and make sure they are informing them of FTC guidelines.

The FTC also plans to crack down on company employees posing as citizen bloggers, a practice known as “astroturf marketing” because of its fake grassroots style. In July, New York Attorney General’s office charged a $300,000 fine to Lifestyle Lift, a New York plastic surgery outfit, for asking its employees to pretend they were satisfied customers and write glowing reviews online.

Celebrities will also be expected to abide by the new guidelines. When gushing about all the products they endorse–from shoes, to cars–they’ll have to be clear about their relationships with advertisers, even on talk shows and in social media.

“Most readers know what the word ‘sponsored’ means,” says Cleland. “We’ll hopefully be hearing and seeing a lot more of it.”